Intel Cuts Outlook on Disk-Drive Shortages from Thai Floods

Intel said Monday that its fourth-quarter results will probably be lower than originally forecast, due to a shortage of hard drives caused by the Thai floods.

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Intel said Monday that its fourth-quarter results will probably be lower than originally forecast, due to a shortage of hard drives caused by the Thai floods.

The company now expects fourth-quarter revenue to be $13.7 billion, plus or minus $300 million, on both a GAAP and non-GAAP basis, lower than the previous expectation of $14.7 billion, plus or minus $500 million.

The reason? Extreme flooding that has plagued Thailand for months, affecting the drive industry's ability to manufacture finished goods. Because most desktops and laptops contain a magnetic hard drive as well as a microprocessor, any slowdown in one component will have an effect on the others.

"The floods in Thailand have had an impact on the supply of hard disk drives, and as a result, the PC supply chain," said Stacy Smith, Intel's chief financial officer, in a conference call with analysts on Monday morning. "As hard drive vendors have committed supply availability into the first quarter of 2012 on a customer-by-customer basis, we have seen a drop in orders of microprocessors for the fourth quarter."

Although Intel believes that PC sales will be sequentially up for the fourth quarter, there has been a reduction in inventories across the supply chain, Smith said, resulting in the lower forecast. The market for the PC and server business is "healthy and growing," Smith said.

Intel's predictions are consistent with most industry forecasts to date, with say that the PC industry will have the most trouble during the first quarter, then improve over the course of 2012. Still, overall PC growth will slow as a result.

On Dec. 8, IHS iSuppli estimated that hard-disk shortages triggered by the Thai floods will result in a 3.8 million-unit shortfall in PC shipments in the first quarter of 2012 compared to the previous IHS forecast issued in August. This will contribute to a reduced forecast for the whole of next year, with global PC shipments now expected to expand by only 6.8 percent in 2012, down from the previous outlook of 9.5 percent growth, the firm said.

Intel said it expects the PC industry will rebuild its microprocessor inventories as supplies of hard disk drives recover during the first half of 2012. Smith said that order rates for PCs had been consistent with Intel's previous forecasts. OEMs, however, had cut their own backlog of PCs in the coming weeks, implying that OEMs had cut back on building PCs. That will affect Intel's sales in turn.

Of late, the outlook of the two major hard-disk makers, Seagate and Western Digital, have improved.

On Dec. 1, Western Digital (WD), which has been the largest manufacturer of hard drives, announced in a press release that it had restarted production of hard drives in one of its factories in Bang Pa-in (BPI), Thailand. The factory had been submerged in six feet of water from Oct. 15 until Nov. 17, when it was pumped dry.

Seagate also slightly raised its own forecasts for fourth-quarter shipments, but warned that some companies may turn to lower-capacity drives to offset their own shortages in the components that go into hard disk drives.

Smith said that Intel hasn't made any changes to its manufacturing plan, in part because Intel is currently building its first 22-nm "Ivy Bridge" microprocessors, which will begin selling in the first quarter. "I think that you'll a bit of an increase in inventory, but less than you'd probably expect," Smith said.

Intel, which manufactures solid-state disk drives that compete with hard drives, said that it has not seen a corresponding increase in SSD sales. "But I expect that to happen," Smith said.

Mark Hachman Mark joined ExtremeTech in 2001 as the news editor, after rival CMP/United Media decided at the time that online news did not make sense in the new millennium.
Mark stumbled into his career after discovering that writing the great American novel did not pay a monthly salary, and that his other possible career choice, physics, required a degree of mathematical prowess that he sorely lacked.
Mark talked his way into a freelance assignment at CMP’s Electronic Buyers’ News, in 1995, where he wrote the...
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